HVOZDENSKÁ, Jana and Veronika KAJUROVÁ. Sovereign Bond Spreads as a Predictors of Gross Domestic Product Growth in North America. In Kajurová, V., Krajíček, J. European Financial Systems 2015. Proceedings of the 12th International Scientific Conference. Brno: Masarykova univerzita, 2015. p. 218-223. ISBN 978-80-210-7962-5.
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Basic information
Original name Sovereign Bond Spreads as a Predictors of Gross Domestic Product Growth in North America
Authors HVOZDENSKÁ, Jana (203 Czech Republic, guarantor, belonging to the institution) and Veronika KAJUROVÁ (203 Czech Republic, belonging to the institution).
Edition Brno, European Financial Systems 2015. Proceedings of the 12th International Scientific Conference, p. 218-223, 6 pp. 2015.
Publisher Masarykova univerzita
Other information
Original language English
Type of outcome Proceedings paper
Field of Study 50600 5.6 Political science
Country of publisher Czech Republic
Confidentiality degree is not subject to a state or trade secret
Publication form printed version "print"
RIV identification code RIV/00216224:14560/15:00084191
Organization unit Faculty of Economics and Administration
ISBN 978-80-210-7962-5
UT WoS 000370679200030
Keywords in English GDP prediction; yield curve; slope; spread
Tags International impact, Reviewed
Changed by Changed by: Mgr. Bc. Hana Bohrnová, Ph.D., učo 179999. Changed: 18. 3. 2016 12:35.
Abstract
The yield curve – specifically the spread between long term and short term interest rates is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead. The steepness of the yield curve should be an excellent indicator of a possible future economic activity. A rise in the short rate tends to flatten the yield curve as well as to slow real growth the near term. This paper aims to analyze the dependence between slope of the yield curve and an economic activity of countries of North America (Canada, Mexico, the United States of America) between the years 2000 and 2014. The slope of the yield curve can be measured as the yield spread between sovereign 10-year bonds and sovereign 3-month bonds. The natural and probably the most popular measure of economic growth is by GDP growth, taken quarterly. The results showed that the best predictive lags differ in each country and each time span we chose. The most common lags of spreads are lag 6 and 5 quarters. The results presented confirm that 10-year and 3-month yield spread has significant predictive power for real GDP growth. These findings can be beneficial for investors and provide further evidence of the potential usefulness of the yield curve spreads as indicators of the future economic activity.
Links
MUNI/A/1127/2014, interní kód MUName: Analýza, tvorba a testování modelů oceňování finančních, zajišťovacích a investičních aktiv a jejich využití k predikci vzniku finančních krizí
Investor: Masaryk University, Category A
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